An IMF report confirms the proposed St. Lucia citizenship by investment program, set to launch in January 2016, has a potential source of significant revenues for the St. Lucian government. The IMF cautions the government to use a prudent approach that recognizes the volatile nature of this revenue source. The report suggests that the government must impose an annual cap on approved applications under its investment immigration program. Further, the revenue generated by the program must be used to pare debt and boost infrastructure development in the country.
Benefiting from low oil prices and increased tourism, the economy of St. Lucia economy is set to grow at 1.6% in 2015, said an assessment by an IMF mission visiting the island. After a recession in 2012 and almost no growth in 2013, the St. Lucian economy grew by 0.5% in 2014. The assessment has indicated that the short-term growth outlook for the nation is favorable, primarily due to growing demand in tourism and transportation sector.
However, the assessment warned of structural issues and urged the government to tackle issues like high public debt, low medium-term growth prospects, and high unemployment at war footing.
The IMF noted that the economic recovery was uneven and that unemployment was high at around 25% due to issues like lack of supply, low productivity, mismatch of labor skill set, and high costs. Data indicates that four of every ten youth in the nation is unemployed. At 80% of the GDP, the country’s public debt is resulting in increased interest outflow, which in turn, is resulting in scarcity of resources for much-needed infrastructure spending.
The IMF has suggested an aggressive plan to reduce public debt to 60% of the GDP by 2030. This will boost confidence and safeguard the country from economic shocks and the financial impact of natural disasters. The report advises of expenditure cuts through agreements freezing wages and other benefits, reduction of non-targeted subsidies, streamlining tax policies, and cutting social expenditures. The government must develop infrastructure and implement skill development programs to mitigate negative impact of these cuts. Industry stakeholders will likely take a cautious approach towards this new program.
Program details may be found here.
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